Theory of Constraints for Dummies

The Theory of Constraints (TOC) is a business theory introduced by Wolfgang Mewes (a German business economist), which was then further proliferated in the United States by Eliyahu M. Goldratt in his book The Goal, (a cult classic). In order to optimize profits at your shop, you need to understand this theory.

Many of you have, at some point, scrutinized key processes in your shop and determined ways to make improvements. Maybe you bought a new chop saw so that you can produce more face frames, bringing you up to 20 parts a minute. It’s exciting, and it seems like a very smart investment - until you realize that your sander (downstream) can only get through 6 parts a minute. Buying that new machine seemed like a no brainer, but now your production hasn’t increased at all. Instead, you’ve created more of a liability in the form of a higher payment, and created waste in the form of throttling down the labor at the chop saw in order to not bury everything down stream. You can’t expect your production to increase unless you speed up the slowest point. It’s easy to buy a newer, faster machine but that may not be the best way to improve production.

There’s no way to have everything in the system work at exactly the same pace, so you can’t totally avoid having a bottleneck somewhere. Once you fix a bottleneck, it will move somewhere else, like water finding a new low point. That’s why it’s important to learn to manage it in the most efficient way possible - let the bottleneck work with the system, not against it.

A more definitive word for bottleneck in this case is constraint. Eliyahu Goldratt used TOC to develop a methodology he calls ‘Drum-Buffer-Rope’. Basically the TOC says, “your production can only go as quickly as your slowest bottleneck,” and Drum-Buffer-Rope metaphor gives a more detailed strategy within this theory.

The ‘drum’ is the constraint of your system (aka the slowest point in the manufacturing). Your drum sets the pace for production because overall, you aren’t going to go any faster than your slowest process. The constraint should always be running at it’s optimized potential. The ‘buffer’ is what allows the constraint to do that. The word buffer is referring to a cushion of inventory large enough to cover the occasional times that your upstream processes aren’t producing enough to continuously feed the constraint. Without the buffer, the constraint could end up waiting around, which is where the efficiency issues occur. The rope is the system to signal to the upstream processes when it needs to change speed (for example, your ship date might be the rope).

A non-woodworking example: A cupcake shop wants to improve their efficiency so they decided to look into this principle. In the cupcake ‘assembly line’ there’s 1) making the batter, 2) baking, 3) cooling, and 4) frosting. Baking takes the longest. To be MOST efficient, the baker should always have a batch in the oven. If she spends her time illogically, she might have been frosting cupcakes instead of remembering to also whip up the batter before the batch in the oven is done. When that happens, the oven is waiting for the next batch - in any industry, when the constraint is waiting, money is being wasted.

To put this theory into practice, let’s start with a simple to-do list:

Identify your constraint Some questions to ask yourself that may offer clarifying clues are: Where do things tend to get backed-up? What are you always waiting on? What part of your process is the most “annoying”? What part of your process is the “oldest”, or what hasn’t been improved in a long time?

Give your constraint a buffer If your constraint is your spray room, then it better never run out of product. In other words, your constraint is a big enough problem on its own. The easiest way to eliminate a quick variable is to make sure it’s never starving. Once it has a true and constant buffer, you can begin to understand why it is indeed your constraint.

Exploit your constraint Once your (current) constraint has been identified, and has plenty of work in a buffer, it’s time to exploit it. The low hanging fruit is usually found in wasted movements and effort with non-value add motions. For example, if your edging profile machine is your constraint, you can’t afford to have that machine idling without parts in it. Commonly, your operator is in charge of changing his own cutters, and that the machine is down for the full amount of time it takes to change over. This mistake, and ones like it are very easily mitigated. Start on low hanging fruit like this, rinse, repeat.

Knowing a little bit about this theory can be incredibly valuable, allowing you to be more informed when it comes to making decisions - like buying equipment or restructuring any processes in your business. 

Sometimes your constraint has nothing to do with machinery or flow. Taking orders, tracking jobs and managing supplies can be chaotic and unsystematic. Allmoxy will eliminate office constraints, and it’s free!